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How to set up a business accounting and tax system

Establishing an accounting and taxation system is a crucial task for companies, and perhaps even individuals. These systems assist you in making wise business decisions, managing your company effectively, and paying your taxes on time.

The process

Choose a favourable business structure - The primary business structure forms include corporations, partnerships, S-corporations, sole proprietorships, and limited liability companies (LLCs). Recognise the kind of company you wish to operate and select a structure that best serves your objectives.

Registration of the business – the most important step is the registration of your business with the relevant authority (for example CAC in Nigeria and Companies House in the UK) - and getting all necessary incorporation documents.

Get your licences and permits - To ensure that your company is compliant with all applicable business and tax regulations, make sure you check in with your state and federal authorities to receive the licences and permissions the business requires.

Open a bank account for your business – when opening a business bank account, choose a bank that favours your business structure and would help your business. This is crucial for maintaining order and for filing your taxes.

Document all business transactions - Keep easy-to-access records of all your financial transactions, including sales, revenue, receipts, expenses, inflows, outflows, and invoices. Accounting software is another tool you may utilise to simplify your work.

Choose a software for both accounting and tax transactions - Invest in software that has the potential to greatly simplify and accelerate your job. These programmes can save you time and effort, particularly for small enterprises. Tax software includes programmes like Tax Slayer and Turbo Tax, while accounting software includes programmes like QuickBooks and Fresh Books.

Understand your tax laws - Knowing the tax laws that apply to your company helps you perform your responsibilities. You may use this information to integrate dates for your tax deadlines and your tax payments into your accounting software, which will facilitate computations and deductions.

Open a chart of accounts - You can keep an eye on every account in your company by using a chart of accounts (COA). Similar to a table of contents, it provides you with a brief summary of all of your accounts. Usually, it consists of the primary account and any sub accounts. For example:

  • Asset (Main Account) = petty cash and checking

  • Liabilities (Main Account) = income tax and account payable

  • Expenses (Main Account) = insurance and equipment.

The above are steps you could take in setting up your business accounting and tax system. However, you can consider consulting a professional like a tax consultant or a financial adviser to assist and provide professional advice.

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